Research shows that around 50% of Australians make a New Year's resolution and around 88% don’t stick to it. Luckily for those who have nominated wealth goals for 2016, another study shows that financial resolutions seem to be easier to stick to. 42% of respondents said it was easier to pay down debt and save more for retirement than to lose weight or give up smoking. Among those who made a financial resolution last year, 29% reached their goal while only 12% of resolutions having to do with involving fitness and or health goals were successful. Here are some tactical ways to reach your financial goals this year.
Black and white: Focus on where you want to get to during 2016, commit it to paper, and then build a plan around it. Saving towards a house deposit, a major event or a holiday provides a powerful incentive and promotes confidence and self-sufficiency.
Budgeting: When you spend less than you earn, you give yourself the potential for long term wealth creation. We all know that, but many find it hard in practice. Sit down with your bank statements from 2015 and take a good hard look at where the money is going. Then write a budget for 2016. HomeBudget, Spendbook and YNAB are three of the many budgeting apps available (some paid, some free) which make budgeting less arduous. Create separate accounts in line with your objectives: have a travel account, a savings account, a home deposit account and a separate shopping account if you’re a prolific shopper.
Accountability: Most people find it difficult to account for the cash they withdraw, as they don’t pay attention to every transaction they make. Creating self-awareness (after the shock of discovery) will go a long way to curbing wasteful spending. So, this year, limit yourself to just one cash withdrawal per week in the household and go through your bank statement every Sunday with your partner. These two easy actions suggestions will go further to achieving your goals than you may think.
Make your savings work: The best savings plans occur in a separate cash fund, with regular deposits for with a set timeframe and with definitive goal. Many in my generation are tempted to spend every cent they can touch. To combat this siphon part of your income off into a fund you can’t easily access: a term deposit or a managed fund with a history of high performance. It will work away for you in the background and you can keep your spendy hands off it. It doesn’t necessarily need to be a traditional savings product with a bank, in fact you may find that you’re probably better off looking for stronger returns elsewhere. You could put your savings in a managed fund. All good investments start with a plan.
Super: Make a commitment to get your super sorted in 2016. Some people let it slide because they find it complex, but it’s really just about setting a goal and ensuring that contributions and investment options support your goal. If in doubt, make 2016 the year you get a financial adviser.
Mortgage: Plan to pay at least an extra $5,000 off your home loan this year. How? Set up a weekly direct debit from your savings account (or even better, from your employer) for $100 direct to your home loan. By setting it up to occur automatically, it will ensure the payment occurs every week without you having to think about it and by the end of the year you would have paid an extra $5k off your loan by taking one simple action. And use this competitive market to save money. Investigate refinancing and talk with a mortgage broker about your options.
Protection: List the top things in life you can’t do without. You’d may list things such as your health, your family, your home and your income – and for good reason. For instance, if you were injured in 2016 and unable to work, how would you and your family pay off your mortgage? Would you be at risk of losing your house? Too many people either ‘set and forget’ their insurances or don’t have adequate cover in place. I recommend you treat your insurance more like a phone contract. Check it annually and ask yourself, is it the best on the market? Is it still relevant to you and your family’s needs? Get a professional to revisit and investigate your insurances for you, to ensure their adequacy. Because if they do fall short of what you need and an adverse event occurs, you may find yourself unprotected. At Yellow Brick Road, we hear far too many horror stories of people who failed to protect themselves fully.
Credit card crunch time: 18 per cent is not a good interest rate for a large balance. If you have more than one card, attack the one with the lowest balance and close it down. Then tackle the one with the highest interest. If you have only have one card make a weekly plan to pay it down, and reduce the limit wherever possible. If you have a mortgage, consider the possibility of refinancing and consolidating your cards into the mortgage.
Above all, remember that there are financial advisers and mortgage brokers out there who can assist you to achieve your financial goals. If in doubt over how to put into practice, your first port of call should be a suitably qualified professional.
PR and Communications Manager
Yellow Brick Road Wealth Management
T 02 8226 8295
M 0450 769 337